Cancelling a "reactivated" cash isa

livz99

Hello fellow tax free savings lovers, it seems I've got myself into a bit of a mess in the past week so I'll try to explain briefly the situation and would very much appreciate some advice.

Last week (2nd May) I reactivated a NatWest ISA which I opened a few years ago (though I did find it strange this was the first time they’d asked me reactivate it even though it’s been earning interest since I opened it) which had been at 2.72% but I was happy enough with.

It was only the next day when I looked on MSE and saw this years rates that I could be doing much better, especially if I lock it away for a couple of years.

Reading NatWest's terms and conditions I was happy to see they offer a 14 day cooling off period allowing me to cancel the account if I write a letter to their customer services which I am happy to do.

The problem comes with the funds currently in this ISA (around £6K), which I wish to keep in the "ISA world". I can't open a new cash ISA until this one has been shut so my only other option would be to transfer it into a Northern Rock ISA I opened last year.

My worry is how long will this transfer take? I only have just less than 2 weeks before it will be too late to cancel this NatWest account. I am also worried that by making this transfer it will invalidate my right to cancel this account altogether.

Does anyone have any experience with this sort of thing?
Many thanks

irishjohn

Although you have reactivated the cash ISA even if this means you have paid some or all of this year's allowance in to it there is nothing to stop you applying for a new ISA - you would do this by looking for one that accepts transfers and apply to open it by having them transfer your Nat West ISA funds into it.

You could also transfer your Northern Rock ISA into the new one if you find an ISA with better rates

innovate

How did you 'reactivate' your ISA?

Anyway, assuming it is an instant access ISA, you can have it transferred any time you like, in its entirety, to any other ISA that allows transfers in. You don't need to cancel anything. Just make sure you ask the new ISA provider to do the transfer for you, do not do it yourself.

May be read up about ISA transfers

Consumerist

livz99 wrote: »

The problem comes with the funds currently in this ISA (around £6K), which I wish to keep in the "ISA world". I can't open a new cash ISA until this one has been shut so my only other option would be to transfer it into a Northern Rock ISA I opened last year.

Under the ISA rules, it's not a current-year ISA until you have paid money into it during this tax year.

NatWest will not let you add to the existing ISA until you have "re-activated" it but, if you have "re-activated" it, does not commit you to adding any (cash or transferred-in) funding.

If you haven't paid money in during the current tax year then you can go ahead and open ISA accounts all over the place with other managers and just ignore the NatWest "re-activated" nonsense. There is no need to cancel anything but just don't pay any new money in. A current-year ISA will not have been opened until you do pay new money into it.

The existing NatWest ISA can be transferred at any time providing the new manager accepts transfers-in.

innovate

Consumerist wrote: »

If you haven't paid money in during the current tax year then you can go ahead and open ISA accounts all over the place

Even if you have paid money into an ISA this year, it is possible to have it transferred to another provider. You would, of course, want to check that you don't fall foul of any penalties - but you'd do that regardless of when you paid money in.

The only condition for transfers of current year ISAs is that the entire I amount paid in in the current tax year must be transferred.

livz99

Thank you for all of your amazing advice.

I guess they just have this reactivation stuff as an excuse to stop paying interest to anyone who hasn't been keeping an eye on their account.
I'm so glad I won't have to get into a conversation with them about closing the account, I was foreseeing a nightmare situation.
I am yet to put any new money in this year so I've still got a fresh start.

I think I'll go ahead and transfer my money out of there and into the nice looking 2 year ISA with Santander.

Thanks again!

Consumerist

livz99 wrote: »

I guess they just have this reactivation stuff as an excuse to stop paying interest to anyone who hasn't been keeping an eye on their account.

Frankly, I have no idea at all why banks have started using this re-activation nonsense. It is utterly meaningless and appears to serve no practical purpose. Interest will continue to be paid on the funds already invested but if you try to add more funding the bank will, presumably, reject it on the grounds that the account is not "re-activated". Why they would want to do that is anyone's guess.

innovate

If you have an old ISA but have not deposited any new money, or made a transfer, into an ISA in the immediately preceeding tax year, you have to sign your provider's T&Cs again before you can deposit/transfer more money .

But there's no reason whatsoever to re-activate anything unless you want to deposit/transfer money.

Most times, the interest rate on that old ISA has got so bad that you really wouldn't want to deposit another penny into it. So no point in re-activating anything.

It's quite scary if banks really make their customers re-activate old ISAs for no good reasons.......either their employees haven't got a clue, or they are trying to con people. Both options are of course quite conceivable.....

Macca83_2

I thought reactivating an isa was only necessary if you wanted to add new contributions after the account had not been funded in over a year?

And that the reactivation was stipulated by hmrc guidelines and not those of the banks?

Regardless, unless there are penalties on the account it can be transferred with relative ease?

Consumerist

Macca83 wrote: »

I thought reactivating an isa was only necessary if you wanted to add new contributions after the account had not been funded in over a year?

Yes that would appear to be the case.

Thanks for the confirmation.